Custom computer company goes back to the '90s

Jan. 3, 2014

Updated Jan. 17, 2014 4:30 p.m.

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Nixsys CEO Nicolas Szczedrin, of Irvine, founded his company in 2002 after losing his previous tech job. Nixsys specializes in producing and maintaining "legacy" computer operating systems and software for companies that can't upgrade to newer systems for various reasons. MACKENZIE REISS, STAFF PHOTOGRAPHER

Nixsys CEO Nicolas Szczedrin, of Irvine, founded his company in 2002 after losing his previous tech job. Nixsys specializes in producing and maintaining "legacy" computer operating systems and software for companies that can't upgrade to newer systems for various reasons.MACKENZIE REISS, STAFF PHOTOGRAPHER

Nicolas Szczedrin was unemployed and in debt. His wife was expecting their first child. And he had just lost all his money investing in a technology company – the former employer – that tapped out when the '90s dot-com bubble burst.

To stay busy while looking for a job, Szczedrin started his own Irvine tech outfit, Nixsys Inc., in 2002 and began making custom computers out of his garage.

Today, Szczedrin and 14 employees occupy an unusual niche of the PC market: building new computers with “legacy” operating systems such as the very basic – and ancient, in computing years – disk operating systems (DOS) and '90s versions of Windows.

Operating out of a new office and warehouse just east of the Orange County Great Park in Irvine, Nixsys sells to customers who need computers that can run old programs or could be programmed to perform simple tasks.

This means the computers have to be built with parts that are no longer made in the United States, so Nixsys began having new versions of old parts made in China. The parts are then shipped and assembled in Irvine.

It costs more to build the specialty machines. It is also expensive to find and buy the licenses for the old operating systems.

“If you go and buy a Dell computer, it's going to cost you $600. If you buy one of our computers, it's going to cost you $900,” Szczedrin said.

Many companies find it too expensive to overhaul their computer systems to make them compatible with old software, or they simply can't stop their operation long enough to convert.

“So for your company to upgrade you to Windows 7, now they need to develop and upgrade the application that has been developed for you to run Windows 7,” he said. “Now you have to upgrade all the computers; you have to train people on how to use Windows 7; you have to upgrade the application with development and implementation; and you have to deploy. That costs a lot of money.”

Santa Ana-based OCDM Direct Marketing fit that mold.

The mailer-marketing company bought a few computers from Nixsys with Windows 95 and 98 to control production equipment. The software for its $200,000 to $300,000 printers won't work with today's off-the-shelf computers, said IT Director Jon Hill.

“It's more economical to replace the controller for hundreds than the whole system for hundreds of thousands,” Hill said.

Other customers include IPS Polymer Systems in Rancho Cucamonga, a plastic resin manufacturer that needed a computer with an old type of connector that matched its lab equipment, and CX Enterprise, a packaging materials manufacturer in Santa Fe Springs whose accounting software is compatible only with Windows XP.

But the niche is full of challenges. Szczedrin said his company often struggles to get licenses to use the old operating systems that customers want. At some point, the licensing companies decide their systems are too old to bother with; Microsoft, for instance, will phase out support for Windows XP in April.

Until about five years ago, Nixsys was focused completely on manufacturing, Szczedrin said, but the recession forced the company to diversify.

“During the recession, no one was buying anything, so we realized that we were very vulnerable,” he said. Sales plummeted in 2008.

So the company began offering information technology services for small and midsize businesses.

Today, legacy system computers make up roughly 60 percent of Nixsys' sales, which totaled $3 million last year, Szczedrin said. Sales of standard computers and servers make up about 20 percent of business, and another 20 percent involves support services.

Revenue has climbed 10 to 20 percent year-over-year since the recession, he said.

Szczedrin said he is not aware of other companies that focus on manufacturing purposely out-of-date computers. Nixsys works quietly to avoid inviting competitors to the niche, he said.

Many who need legacy systems are not aware that companies like Nixsys exist, he said. “Most people assume that because they're legacy systems, they can't find them anymore.”

Nixsys' business model is sustainable over time if the company continues to dominate its niche, especially through hardware sales, said Jay Chou, a computer industry analyst at International Data Corp. Smaller IT firms sometimes offer legacy software support, but most typically try to get clients onto newer systems.

The challenge in the future, Szczedrin said, won't be finding customers – it will be locating the product.

“We don't know if we're going to be able to keep building these components, or finding the components to build what we need,” he said. “On the other hand, what is new today is going to be legacy 10 years from now.”

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